File this under the “what were they thinking?” category.
Netflix announced that it is splitting its DVD rental and streaming video businesses in an attempt to overcome the massive negative publicity and rapidly escalating customer attrition since it raised prices for both services in July.
Okay, that makes sense.
But here’s the killer.
In an attempt to “win back the trust of its customers,” the company is rebranding its DVD rental service to Qwikster.
Let’s see if I understand this correctly. Some 25 million customers signed up for Netflix as a convenient and preferred way to rent DVDs. And, until a couple of months ago, these customers seemed to trust Netflix.
So now, to win back the trust of the remaining customers (it has reportedly lost over 600,000 monthly subscribers since the July price hike), the CEO has decided to change the name of its DVD rental business and use the Netflix brand for its streaming services.
What could they possibly be thinking? Why not leverage the equity of the Netflix brand and call the streaming service Netflix On Demand, Netflix Streaming, Netflix Video, or even the Netflix Channel? Or anything else that created a brand extension and told customers “Netflix is a brand you can continue to trust.”
And if company management thinks the Netflix brand is not good enough to trust for those remaining 24 million customers who will now forcibly be shifted to Qwikster, what makes anyone think it is a brand that can be trusted for video streaming services?
Apparently even the Netflix DVD business will move to a new website. How confusing will that be to its customers?
I wonder how popular the search phrase “Netflix alternatives” is becoming?
In the past two months, the company has ineptly implemented a much maligned price hike to its existing customers (so much for customer loyalty), split its services into two, and dropped the Netflix branding from its most popular service.
So what does the Netflix brand stand for now? Who knows.
No wonder Netflix has lost roughly 50% of its market value since this series of blunders began in July.
If I were on the Board of Netflix I would be asking for the immediate resignation of CEO Reed Hastings on the grounds of destroying the brand equity of Netflix.